LONDON (Reuters) - Creditors of Toys ‘R’ Us UK overwhelmingly approved the struggling retailer’s restructuring plan at a meeting on Thursday, enabling it to stave off a collapse into administration.
Earlier this month the British arm of Toys ‘R’ Us Inc of the United States, which filed for bankruptcy protection in September, said it would seek creditor approval for a Company Voluntary Arrangement (CVA).
The plan will see the closure of at least 26 of its 105 British stores in 2018 and reduced rent on the stores that stay open. It would lead to 500-800 redundancies among its total workforce of 3,200.
The stores earmarked for closure will, however, remain open as normal through Christmas and into the new year.
At Thursday’s meeting 98 percent of Toys ‘R’ Us’ UK creditors, voted in favour of the restructuring proposals, surpassing the required 75 percent threshold.
“The vote in favour of the CVA represents strong support for our business plan,” said Toys ‘R’ Us UK managing director Steve Knights.
Crucially Britain’s pensions lifeboat, the Pension Protection Fund (PPF), which is one of the retailer’s biggest creditors, opted to support the restructuring, reversing a position it had taken earlier in the week.
The PPF changed its stance after Toys R Us agreed to pay 9.8 million pounds ($13.1 million) into the pension plan - 3.8 million pounds in 2018 and 6 million pounds in 2019 and 2020.
The retailer’s pension deficit recovery plan has been shortened to ten years, while it has also agreed to seek additional support from its U.S. parent.
“This offer goes a long way to addressing the PPF’s concerns and in de-risking the pension scheme,” said Malcolm Weir, the PPF’s director of restructuring and insolvency.
Toys ‘R’ Us UK has struggled in recent years as shoppers increasingly prefer to spend online rather than visit its large out-of-town sheds.
British consumers have been squeezed through most of this year by rising inflation which hit its highest in nearly six years last month, at a time when wages are failing to keep up.
Reporting by James Davey; Editing by Keith Weir